Regulatory Support: Key to Unlock Indonesia’s Solar Potential

Jakarta, February 24, 2022 – The development of solar energy in Indonesia since 2018 has been increasing, although not significantly. The Ministry of Energy and Mineral Resources noted that there was an increase in installed capacity for rooftop solar to 48.79 MW at the end of 2021 from only 1.6 MW in 2018. Progressive developments have also occurred in utility-scale PLTS, with the lowest PLTS electricity price being below 4 cents USD/kWh. One of the reasons for the increasing adoption of rooftop solar, apart from developing technology, is also due to the policy of the Minister of Energy and Mineral Resources Regulation number 49 of 2018 as the first official rule regarding rooftop PV.

The Institute for Essential Services Reform (IESR) projects an increase in the capacity of rooftop PV in the next 10 years, which will come from the government setting a target for solar PV of 4.7 GW in the RUPTL 2021-2030. The enactment of the Minister of Energy and Mineral Resources Regulation number 26 of 2021 provides new hope for PLN customers who will install rooftop PV because this new rule is considered beneficial to all parties.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR), and Chairperson of the Indonesian Solar Energy Association (ISA) in a webinar entitled “Indonesia Solar Chapter: Unlocking the Unlimited Potential to Embrace a Greener Future” (24/2/2022) stated that solar energy continues to grow in Indonesia both for household and utility-scale.

“In the coming years, solar energy has promising potential in Indonesia because the government has quite a lot of targets for using solar PV, such as the target of 3.6 GW in 2025 and replacing diesel with solar plus battery,” he said.

However, Fabby underlined a number of challenges in the development of solar PV in the country such as the policy framework that is not strong enough, as well as the role of PLN as the sole off-taker for the electricity produced so that the development of solar PV is highly dependent on the condition of the PLN grid. The Local Content Requirement (LCR) for solar panels also makes investors less confident to invest in Indonesia.

“The domestic solar panel industry is not yet mature enough to produce tier-1 solar modules. IN which for bankable PV projects, they are required to use a tier-1 module,” he explained.

Fendi Liem, Founder/Managing Director of PT Selaras Daya Utama (SEDAYU), agrees that the clarity of government regulations is the trigger for the exponential growth of rooftop solar. The issuance of the Minister of Energy and Mineral Resources Regulation 49/2018 has undeniably provided a sense of security for both investors and potential customers of rooftop solar power plants since 2018. Fendi reminded all government stakeholders to accelerate coordination and synchronization when there are new regulations.

“We often encounter rules that are out of sync between institutions in the government. This of course creates a bad impression from the entrepreneur. The desire to invest can be reduced because the rules between government institutions are not in harmony,” explained Fendi.

Fendi sees 2022 as a momentum for the rise of rooftop PV after the MEMR Ministerial Regulation 26/2021 applies which provides more benefits for rooftop PV customers, don’t let this momentum pass by. One of the government’s homework is to capture this momentum by strengthening the policy framework so that both developers and consumers will no longer hesitate to invest in rooftop PV.

Erik Peper, Country Director of Indonesia Infunde Development, sees the development of solar energy to accelerate the energy transition in Indonesia as the right thing to do. However, there are a number of obstacles such as scalability, land acquisition, and project clustering. Erik also sees that there is still uncertainty from the Indonesian government to use clean energy technology.

“The energy transition must be prepared carefully and look at the possible developments of the situation in the future. Technology that is currently cheap/economical may become expensive in the future. If there is a financial cost (of the transition) let be it, as in the long run it will be beneficial, it should be treated as an investment.”

Solar PV Answers Industrial and Commercial Needs to Provide Green Products

Semarang, October 06, 2021 – The Commercial and Industry sectors are potential partners to accelerate the penetration of renewable energy. The increasingly strong market demands for green products encourage the commercial and industrial sectors to switch to environmentally friendly technologies in order to maintain their existence in the global market. Solar PV is a strategic choice for the commercial and business sectors considering its relatively fast installation, as well as the availability of solar energy sources that are evenly distributed throughout Indonesia. In addition, investing in solar PV can reduce production costs.

Fabby Tumiwa, Executive Director of the Institute for Essential Services Reform (IESR) explained that currently in line with efforts to reduce greenhouse gas (GHG) emissions, the industrial sector is faced with the obligation of the economic value of carbon. Especially for goods that are exported such as to European countries, America and Japan. The carbon footprint of a product that exceeds the specified maximum will be taxed. In addition, public awareness about sustainability issues is increasing, as stated by a survey by WWF and The Economist which found that searches on search engines with the keyword ‘sustainability’ increased by more than 71% during 2016-2020.

“Shareholders of companies have asked that all these companies commit to use 100% renewable energy. So if we want Central Java to become an industrial center, access to renewable energy must be facilitated,” said Fabby at a webinar organized by IESR with the Central Java Government entitled “Rooftop Solar Energy for the Commercial and Industrial Sector in Central Java” (6/10/2021).

In general, in terms of adoption, the number of rooftop solar PV users in Indonesia is increasing. Based on data from the Directorate General of EBTKE, until last August 2021, there were 4,133 rooftop solar PV customers in Indonesia, with a total installed capacity of 36.74 MWp. Judging from the capacity of rooftop PV by region, Central Java and DIY were ranked third with a rooftop solarcapacity of 5.83 MWp.

Chrisnawan Anditya, Director of Aneka EBT at the Ministry of Energy and Mineral Resources, explained that the government has given priority to the development of rooftop solar power plants considering its huge potential, fast installation, and very competitive prices.

“The medium-term strategy that is being pushed for the development of PV is rooftop solar which is targeted at 3.6 GW by 2025. In addition, we also continue to encourage utility-scale PV,” explained Chrisnawan on the same occasion.

To support infrastructure and services towards the energy transition, PLN must also improve on preparing grid adaptations and adapting to a business model that accommodates large amounts of renewable energy.

“This rooftop PV has an impact on the current PLN grid due to its intermittent nature. So PLN must provide a standby unit to supply electricity when the power generated by the PV rooftop cannot meet the existing electricity needs,” explained M. Irwansyah Putra, General Manager PLN Central Java – DIY.

Irwan also explained that in supporting the carbon tax mechanism, PLN has issued an REC (Renewable Energy Certificate). By purchasing this certificate, PLN will distribute electricity obtained from clean energy to the industry.

Questioning policies to encourage renewable energy in Central Java Province, the Head of the Central Java Province ESDM Office said that his party had prepared various policies. However, according to him, to encourage certain changes, in this case the transition from fossil energy to renewable energy (Solar PV-ed), policy support alone is not enough.

“Change will happen more quickly if it is driven by a market driven mechanism, so it’s not just complying with certain rules. The Central Java ESDM Office has tried to make policy packages that cover this market aspect with input from various parties such as the government, universities, and NGOs,” explained Sujarwanto.

The Central Java Regional Government also provides assistance to the commercial and industrial sectors in Central Java which are transitioning to green industries. “There are several steps taken to implement the green industry, i.e. training, facilitating certification for the green industry as well as awarding the green industry. Several companies in Central Java received this award,” explained M. Arif Sambodo, Head of the Industry and Trade Office of Central Java Province.

Opportunities for the commercial and industrial sectors to adopt solar PV are getting wider with the availability of various Solar PV investment schemes such as installments and leases. Anggita Pradipta, Head of Marketing for SUN Energy, said that there are three schemes offered by SUN Energy for prospective rooftop solar PV customers, namely Solar purchase, Performance Based Rental, and Solar Leasing.

“For the commercial and industrial sectors who want to install solar panels but are constrained by the initial installation cost, we recommend taking a performance based rental scheme. With this scheme, the customer will be bound by a contract for 15-25 years, where all the costs of maintaining the solar PV unit will be borne by SUN Energy, after the contract ends, the assets will become the property of the customer,” explained Anggi.